Preparation of Economic and Finance Ministers Council, Brussels, 14 May

The EU's Council of Economic and Finance Ministers will take place in Brussels on Tuesday, 14 May at 11.00. The European Commission will be represented by Olli Rehn, Vice President and Commissioner for Economic and Monetary Affairs and the Euro, Michel Barnier, Commissioner for Internal Market and Services, Algirdas Šemeta, Commissioner for Taxation and Customs Union and Janusz Lewandowski, Commissioner for Financial Programming and Budget. A press conference is expected to take place after the meeting.

Rules for Bank Recovery and Resolution (CH)

The Commission's proposal on recovery and resolution tools for banks in crisis is a key pillar of the new financial regulatory framework that we are building for all banks of the European Union.

It was presented on 6 June 2012 (see IP/12/570 and MEMO/12/416) and it would implement the European Union's commitment as part of the G20 to set up crisis prevention and crisis management frameworks.

To ensure the taxpayer does not always end up bailing out banks, the EU has proposed a common framework of rules and powers to deal with banks in difficulty by 2015. Repeated bailouts of banks have increased public debt and imposed a very heavy burden on taxpayers.

This EU-wide resolution framework for the managed resolution of banks and investment firms would give us all the tools:

to prevent crises from emerging in the first place (for instance by ensuring that all banks have recovery and resolution plans in place);

to address them early on in the process if they do (for instance the power to appoint a special manager at bank for a limited period to deal with problems);

and finally, if the financial situation deteriorates beyond repair, national authorities in all Member States will have a common toolkit and roadmap to manage the failure of banks in an orderly fashion, with a "bail-in" mechanism to call on shareholders and creditors when attributing losses of failed banks.

This file is a priority as confirmed by Heads of State and Government on numerous occasions, including in the European Council Conclusions of December 2012. The recent developments in Cyprus highlighted once again how important it is for the EU to have mechanisms in place to deal with failing banks. The Commission hopes the discussion at EU's Council of Economic and Finance Ministers can make real progress on outstanding points in this negotiation, especially on the design of the bail-in tool, and Commissioner Barnier will reiterate his full support to the Irish Presidency in reaching an agreement on this important proposal by end of June.

Rapid agreement among Member States will enable compromise discussions to start with the European Parliament, and allow the co-legislators to adopt the proposal in the coming months.

Furthermore, the architecture of the banking union will build on the foundations of this Directive in order to establish an integrated European resolution system for all countries participating in Single Supervisor System. The Commission intends to make a proposal on the Single Resolution Mechanism this summer.

The Council will discuss the draft amending budget no. 2 presented by the Commission on 27 March 2013. The draft estimates that an extra €11.2 billion is required for the EU budget to reimburse beneficiaries of EU funded programmes completed across Europe in 2012 as well as to honour the Cohesion Policy claims that will fall due in 2013. This proposal needs to be authorised by the Council and the European Parliament. The level of the request is mostly due to the fact that the 2013 budget was set on the level of payments below the Commission's estimates and below the final level of payments in the 2012 budget, with billions of euros worth of 2012 payments for EU funded projects being postponed to 2013. When adopting the 2013 EU budget last November, the Council and the Parliament issued a joint statement stressing that the Commission should present at an early stage in the year 2013 a draft amending budget devoted to the sole purpose of covering the 2012 suspended claims as soon as the suspensions are lifted, and the other pending legal obligations without prejudice to the proper implementation of the 2013 budget. 100% of that draft amending budget will go to beneficiaries of EU funds such as regions, people receiving training, scientists, etc. Not one cent of it is for the EU institutions themselves.

In the run up to the European Council of 22 May Commissioner Šemeta will urge the Council to reach agreement on a number of concrete legislative measures and actions to fight against tax fraud and evasion in the EU and globally.

Cross-border automatic exchange of information (ET)

Commissioner Šemeta will urge the Council to reach political agreement on the Commission proposal to amend the Savings Directive in order to close its current loopholes, notably by covering a wider range of innovative financial products, pensions and life insurance products and by ensuring a more effective treatment of savings income obtained through trusts and foundations (see MEMO/12/353).

Commissioner Šemeta also expects the Council to give the Commission a mandate to start negotiations with Switzerland, Liechtenstein, Monaco, Andorra and San Marino on the revision of agreements signed with these countries on taxation of savings. The aim of such negotiations is to ensure that these 5 countries apply measures equivalent to those foreseen in the amended Savings Directive and to examine whether other improvements should be made to the agreements, in the light of international developments (see MEMO/12/353).

Since 2005, the Savings Directive and related international agreements with Switzerland, Liechtenstein, Monaco, Andorra and San Marino have ensured that interest on savings income in other EU Member States is either automatically reported to the relevant tax administration or subjected to a withholding tax. The Council will discuss the reinforcement of the current EU legislation, based on the EU's own experience and recent international developments on tax evasion and avoidance.

Action Plan to strengthen the fight against tax fraud and tax evasion (ET)

The Commission expects the Council to adopt conclusions on the Action Plan to fight against tax fraud and evasion and the Recommendations on tax havens and on aggressive tax planning proposed by the Commission on 6 December 2012 (see IP/12/1325 and MEMO/12/949).

The Commission's Action Plan aims at a more effective EU response to tackle tax evasion and avoidance. It sets out a comprehensive package of over 30 measures, for now and for the future, to help Member States protect their tax bases. Of particular importance are two Recommendations on tax havens and aggressive tax planning which are part of the Action Plan.

The first Recommendation foresees a strong EU stance against tax havens, going beyond the current international measures. Using common criteria, Member States are encouraged to identify tax havens and place them on national blacklists. Measures to persuade these non-EU countries to apply EU transparency standards are also set out.

The second Recommendation is on aggressive tax planning. It suggests ways to address legal technicalities and loopholes which some companies exploit to avoid paying their fair share of tax.

Other initiatives foreseen in the Action Plan include a Taxpayers' Code, an EU Tax Identification Number, a review of the anti-abuse provisions in key EU Directives, and common guidelines to trace money flows.

Macroeconomic Imbalances Procedure: in-depth reviews (SOC)

The Council will exchange views on the findings of the in-depth reviews published by the Commission on 10 April (IP/13/313; MEMO/13/322). Reinforced economic governance makes it possible to address macroeconomic imbalances pre-emptively to ensure the adoption of adequate policies to tackle imbalances and laythe foundations for sustainable growth and job creation. In-depth reviews were carried out in the 13 Member States identified in last November's Alert Mechanism Report as showing signs of macroeconomic imbalances (IP/12/1275; MEMO/12/912). The conclusion was that Belgium, Bulgaria, Denmark, France, Italy, Hungary, Malta, The Netherlands, Finland, Sweden and the United Kingdom were experiencing imbalances, which are not excessive in the sense of the Macroeconomic Imbalance Procedure. In the case of Spain and Slovenia, the Commission considered the imbalances to be excessive.

The in-depth reviews served as analytical raw material for the Member States in preparing their Stability and Reform programmes. They will feed into the Country Specific Recommendations the Commission will propose on 29th May for all EU Member States as part of the European Semester.

Vice-President Olli Rehn, responsible for Economic and Monetary Affairs and the Euro said recently:"Our transformed economic governance enables us to address macroeconomic imbalances pre-emptively and to create the foundations for sustainable growth. Decisive policy action by Member States and at EU-level is helping to rebalance the European economy. But significant challenges remain: it will take some time yet to complete the unwinding of the imbalances that were able to grow unchecked in the decade up to the crisis, and which continue to take a toll on our economies."

The Commission will present two Communications adopted on 20 March 2013 (IP/13/248; MEMO/13/259) on the next steps towards a deep and genuine Economic and Monetary Union (EMU) with the aim of strengthening economic policy coordination and integration in the euro area.

One Communication includes concrete proposals to discuss, at EU level, the most important economic policy reforms that Member States plan to undertake before they take a final decision on these reforms at national level. That way, any positive or negative spillovers of the reforms on other EU countries can be properly taken into account early on in the decision-making process.

The other Communication puts forward options to introduce a Competitiveness and Convergence Instrument. The Instrument would consist of two elements. First, it would invite Member States to commit to the timely implementation of a limited number of specific reforms through a contractual arrangement. Second, the Instrument would provide the possibility of financial support for accompanying measures that help smoothen implementation of these reforms; for example, for training or active labour market policies.

Olli Rehn, Vice-President for Economic and Monetary Affairs and the Euro has said: "With these two Communications, the Commission is building on the major steps forward taken in budgetary policy coordination, by enhancing the framework for better coordinated structural reforms. Our aim is very clear: to help Member States design, decide and implement better, earlier and faster reforms for growth, competitiveness and job creation."

The EU Presidency and the Commission will debrief the Council on the main outcomes of the meeting of the G20 Finance Ministers and Central Bank Governors and the IMF/World Bank Spring meetings that took place in Washington in April.

At the meetings, the IMF emphasised that the global economic recovery remains uneven and that global economic activity is moving at "three speeds" (Global growth prospects are little changed—weak for some, improving or strong for others)1. The IMF forecasts global growth at 3.3% of GDP for 2013 and 4% for 2014. Risks have increased compared to the last G20 Ministerial meeting in Moscow in February. The main risks are the recession in Europe and the absence of medium-term fiscal consolidation in Japan and the US. There was strong recognition by the EU's G20 partners that due to policy action in the euro area, major tail risks have been avoided and financial market conditions continue to improve.

G20 Ministers and Governors reaffirmed that maintaining fiscal sustainability in advanced economies remains essential. As agreed at the G20 summit in Los Cabos last year, advanced economies will develop medium-term fiscal strategies by the St Petersburg Summit in September.

Particular attention was paid to tax avoidance, tax evasion and tax havens. The G20 agreed that the automatic exchange of information is expected to be the standard in future. The Commission views the agreement by the G20 Ministers on the automatic exchange of information as a significant milestone. This marks the next crucial step forward since the 2009 agreement in Pittsburgh on non-cooperative jurisdictions which focused on promoting the exchange of information on request. The OECD (Organisation for Economic Co-operation and Development)was mandated to develop a new multilateral standard on the automatic exchange of information, taking into account existing arrangements (US FATCA- Foreign Account Tax Compliance Act - and EU Savings Directive).

Other items

Fiscalis 2020 (ET)

The Council is due to agree on the Commission's proposal to set up of a Fiscalis 2020 Programme (see IP/11/1328 and MEMO/11/767). Fiscalis 2020 will significantly contribute to improve cooperation between tax authorities within the EU. The proposed programme would in particular support initiatives and cooperation to fight against tax fraud, tax evasion and aggressive tax planning through networking, joint actions and training amongst national tax administrations. The programme would also fund the operation and development of European information systems for taxation. These systems allow Member States to exchange information which is crucial in the fight against tax fraud.

In addition, the Irish Presidency will update the Council on progress made in respect of some current legislative including:

Revised rules for markets in financial instruments (CH)

In October 2011, the Commission presented proposals for a review of the Markets in Financial Instruments Directive (MiFID) aimed at establishing safer, sounder, more transparent and more responsible financial markets that work for the economy and society as a whole. The proposals complement the on-going reform of EU derivatives markets by mandating the trading of standardised derivatives onto organised trading venues and by enhancing the transparency and oversight of derivatives markets including commodity markets in line with our G20 commitments.

The Irish Presidency will present an update on the negotiation where there are still two big outstanding issues: non-discriminatory access to clearing, as well as the issue of transparency and market structure.

Commissioner Barnier will support the Irish Presidency's work to reach a general approach in the Council with the aim to start discussions as soon as possible with the European Parliament in order to reach a final agreement on the texts. Important points to discuss concern access to trading venues and pre-trade transparency.

The threats associated with money laundering and terrorist financing are constantly evolving, which requires regular updates of relevant rules. That is why on 5th of February 2013, the European Commission presented two proposals to reinforce the EU's existing rules on anti-money laundering and fund transfers (IP/13/87): a proposal for a Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing and a proposal for a Regulation on information accompanying transfers of funds to secure "due traceability" of these transfers.

Both proposals took into account the latest Recommendations of the Financial Action Task Force (FATF) (MEMO/12/246), the world anti-money laundering body, and go further in a number of fields to promote the highest standards to counter money laundering and terrorism financing. The rules, once agreed, would improve considerably the existing situation by introducing a strengthened role for the European Supervisory Authorities to provide EU-wide guidance, assessments and standards in the field of anti-money laundering and by reinforcing information sharing arrangements between financial intelligence units.

Anti-money laundering rules are crucial in their own right but they have also to play a vital role in providing information which can be accessed, having due regard to legal procedures, by those who police tax systems. But anti-money laundering rules are not the prime and only tool to tackle tax evasion. That is why this initiative is fully complementary to the Commission’s recent initiatives aimed at fighting tax fraud and evasion, although it is important to recognise that each issue calls for its own appropriate and tailored approach.

The Commission welcomes the decision of the Irish Presidency to bring this issue onto the agenda of the Council. This underlines the importance of rapidly putting in place strengthened rules to combat money laundering and terrorist financing.